MGSC 487 Gaffney Final Exam Questions
With Correct Answers
Fair Price - CORRECT ANSWER✔✔-The lowest price that ensures a
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continuous supply of the proper quality where and when needed.
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Occurs over long-run only if the supplier's making a reasonable profit
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4 Factors of Fair and Just Price - CORRECT ANSWER✔✔-1. Past
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experience: talk to other people, look at reports | | | | | | |
2. Knowledge of Production: understand what/how
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3. Cost of Production: supplier is doing
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4. Logistics Costs: lead time, holding costs
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Cost Approach - CORRECT ANSWER✔✔-- Price is set greater than direct
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costs, allowing for sufficient contribution to cover indirect costs and
| | | | | | | | | |
overhead, and leaving a margin for profit (price is a certain amount over
| | | | | | | | | | | |
direct costs and allow contribution to cover indirect costs and profit)
| | | | | | | | | | |
,- Purchaser seeks lower cost suppliers, manufacturing, and/ or service
| | | | | | | | | |
alternatives
- Reverse engineer
| |
- Negotiation
|
Market Approach - CORRECT ANSWER✔✔-• Prices are set in the
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marketplace and may not be directly related to cost
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• Follows supply and demand model
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Example: Oil, gold | |
Find a way around it:
| | | | |
• Select suppliers who have other incentives
| | | | | | |
• Substitute "like" materials: Aluminum instead of copper
| | | | | | |
| (parking brake failure example) --> air freight for immediate recovery
| | | | | | | | |
• Outsource (or insource)
| | |
• Establish long-term contracts: forward-buying
| | | |
Government/ Regulatory Influence - CORRECT ANSWER✔✔-- | | | | | |
Government sets production and import quotas | | | | | |
,- Tariffs
| |
- Regulation of buyer and seller behavior
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- Set prices for government run organizations
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Sherman Anti-trust Act (1890) - CORRECT ANSWER✔✔-- Price fixing is
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illegal (Hershey, Nestle, Mars chocolate example)
| | | | |
Robinson-Patman Act (1936) - CORRECT ANSWER✔✔-- Illegal to sell to | | | | | | | | | |
customers at different prices (one price law) | | | | | |
Exceptions: |
- Large purchase quantity
| | |
- Moving obsolete material (trying to get rid of unused stock by selling it
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at a lower than market value price)
| | | | | |
- Meeting local competition (gas station example)
| | | | | |
Types of Purchases - CORRECT ANSWER✔✔-1. Raw Materials
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- includes sensitive commodities such as copper, wheat, petroleum,
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steel, and so forth
| | |
, 2. Special Items
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3. Standard Items
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- nuts and bolts from Walmart
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4. Small Value Items (MRO)
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- whatever is needed to keep operations running
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5. Capital Goods
| |
- land, buildings,equipment, patents, copyrights
| | | |
6. Services
|
- advertising, security, 3PL, consulting, insurance
| | | | |
7. Resale
|
- private branding, batteries and accessories sold at gas stations
| | | | | | | | |
Firm Fixed Price (FFP) - CORRECT ANSWER✔✔-- Price does not change
| | | | | | | | | | |
under any circumstances
| | |
- Risk reduction
| |
With Correct Answers
Fair Price - CORRECT ANSWER✔✔-The lowest price that ensures a
| | | | | | | | | |
continuous supply of the proper quality where and when needed.
| | | | | | | | |
Occurs over long-run only if the supplier's making a reasonable profit
| | | | | | | | | |
4 Factors of Fair and Just Price - CORRECT ANSWER✔✔-1. Past
| | | | | | | | | | |
experience: talk to other people, look at reports | | | | | | |
2. Knowledge of Production: understand what/how
| | | | |
3. Cost of Production: supplier is doing
| | | | | |
4. Logistics Costs: lead time, holding costs
| | | | | |
Cost Approach - CORRECT ANSWER✔✔-- Price is set greater than direct
| | | | | | | | | | |
costs, allowing for sufficient contribution to cover indirect costs and
| | | | | | | | | |
overhead, and leaving a margin for profit (price is a certain amount over
| | | | | | | | | | | |
direct costs and allow contribution to cover indirect costs and profit)
| | | | | | | | | | |
,- Purchaser seeks lower cost suppliers, manufacturing, and/ or service
| | | | | | | | | |
alternatives
- Reverse engineer
| |
- Negotiation
|
Market Approach - CORRECT ANSWER✔✔-• Prices are set in the
| | | | | | | | | |
marketplace and may not be directly related to cost
| | | | | | | | |
• Follows supply and demand model
| | | | | |
Example: Oil, gold | |
Find a way around it:
| | | | |
• Select suppliers who have other incentives
| | | | | | |
• Substitute "like" materials: Aluminum instead of copper
| | | | | | |
| (parking brake failure example) --> air freight for immediate recovery
| | | | | | | | |
• Outsource (or insource)
| | |
• Establish long-term contracts: forward-buying
| | | |
Government/ Regulatory Influence - CORRECT ANSWER✔✔-- | | | | | |
Government sets production and import quotas | | | | | |
,- Tariffs
| |
- Regulation of buyer and seller behavior
| | | | | |
- Set prices for government run organizations
| | | | | |
Sherman Anti-trust Act (1890) - CORRECT ANSWER✔✔-- Price fixing is
| | | | | | | | | |
illegal (Hershey, Nestle, Mars chocolate example)
| | | | |
Robinson-Patman Act (1936) - CORRECT ANSWER✔✔-- Illegal to sell to | | | | | | | | | |
customers at different prices (one price law) | | | | | |
Exceptions: |
- Large purchase quantity
| | |
- Moving obsolete material (trying to get rid of unused stock by selling it
| | | | | | | | | | | | | |
at a lower than market value price)
| | | | | |
- Meeting local competition (gas station example)
| | | | | |
Types of Purchases - CORRECT ANSWER✔✔-1. Raw Materials
| | | | | | |
- includes sensitive commodities such as copper, wheat, petroleum,
| | | | | | | | |
steel, and so forth
| | |
, 2. Special Items
| |
3. Standard Items
| |
- nuts and bolts from Walmart
| | | | |
4. Small Value Items (MRO)
| | | |
- whatever is needed to keep operations running
| | | | | | |
5. Capital Goods
| |
- land, buildings,equipment, patents, copyrights
| | | |
6. Services
|
- advertising, security, 3PL, consulting, insurance
| | | | |
7. Resale
|
- private branding, batteries and accessories sold at gas stations
| | | | | | | | |
Firm Fixed Price (FFP) - CORRECT ANSWER✔✔-- Price does not change
| | | | | | | | | | |
under any circumstances
| | |
- Risk reduction
| |
